The financial crisis might make China a new base for automotive manufacturing

The global automotive industry, one of the industries hit hardest by the financial crisis, is likely to plunge into a structural overhaul. Ford Motor Co said in its latest report that it suffered gigantic losses last year of more than US$14.7 billion due to a sharp drop in global sales.

The whole industry is in a severe recession. Almost every automaker has been impacted. Even Toyota, the world's top-selling automaker, has forecast its first operating loss in 71 years. GM has withdrawn from Taiwan in order to ease the financial burdens of its US operations. The company sold its 49 percent shares in its joint venture with Yulon Motor to the latter for the symbolic price of one new Taiwan dollar, essentially abandoning all of its investments on the island.

But the hard situation faced by other carmakers in the world is not hurting their business on the mainland. A new vehicle manufacturing plant, Shanghai GM (Shenyang) Beisheng Automotive Ltd, with a total investment of US$390 million, opened on Dec 17.

GM has reasons for confidence in China; statistics show the company sold 913,400 vehicles in the mainland in the first 10 months last year, up 9 percent year-on-year.

Ford also made a rare operation growth in the Chinese market and decided to move its regional Asia-Pacific and Africa headquarters from Bangkok to China.

Toyota is also doing well on the mainland. Its joint venture with Guangzhou Motor is running at full capacity (producing 200,000 vehicles a year) and a second plant is under construction now. Deputy General Manager Feng Xingya forecast more sales growth in 2009.

China will sooner or later become a motor manufacturing base for the whole world. Automobile giants will be increasingly dependent on the Chinese market, which is the only major market where they are still turning profits. Relocating production capacity, technologies and management experience to China would probably help them pull through the global economic downturn.

After being taken as a sizable consumer market by international carmakers for years, China will assume a new role as a car-manufacturing base.

(China Daily March 2, 2009)